XML 40 R13.htm IDEA: XBRL DOCUMENT
v3.19.3

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income before income taxes from continuing operations are presented below.
| 2019 |  | 2018 |  | 2017
| (in millions)
U.S. | $ | 78.4 |  |  | $ | 97.3 |  |  | $ | 82.7 |
Non-U.S. | 3.7 |  |  | (1.6 | ) |  | (4.2 | )
Income before income taxes | $ | 82.1 |  |  | $ | 95.7 |  |  | $ | 78.5 |
On December 22, 2017, HR-1, commonly referred to as the Tax Cuts and Jobs Act (“Act”), was enacted, which made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21% from 35% effective January 1, 2018, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions. Our deferred tax assets and liabilities are recorded at the enacted tax rates in effect when we expect to recognize the related tax expenses or benefits. The average of these rates varies slightly from year to year but historically has been approximately 39%. With the legislation changing rates taking place in the quarter ended December 31, 2017, we remeasured our deferred tax items at an average rate of approximately 25% and recorded an income tax benefit of $42.5 million. The Act also imposes a one-time transition tax on the undistributed, previously-untaxed, post-1986 foreign “earnings and profits” (as defined by the IRS) of certain U.S.-owned corporations. Determination of our transition tax liability requires us to calculate foreign earnings and profits going back to 1992 and then to assess our historical overall foreign loss position and the applicability of certain foreign tax credits. In March 2018, we recorded a provisional transition tax of $7.5 million for the one-time deemed repatriation tax on accumulated foreign earnings of our foreign subsidiaries. Upon further analyses of the Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and IRS, we finalized our calculations of the transition tax liability during the quarter ended December 31, 2018. As a result, we reduced our initial provision by $0.6 million, which is included as a component of income tax expense. As of September 30, 2019, the remaining balance of our transition obligation is $5.8 million, which will be paid over the next seven years, as provided in the Act. Other than for Krausz’s investment in its U.S. subsidiary, we have not provided income taxes for unrepatriated foreign earnings that may be subject to withholding tax or any outside basis differences inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. We have a foreign tax credit carryforward of $4.5 million that we do not expect to utilize prior to expiration. The components of income tax (benefit) expense are presented below.
| 2019 |  | 2018 |  | 2017
| (in millions)
Current: |  |  |  |  |
U.S. federal | $ | 11.6 |  |  | $ | 25.7 |  |  | $ | 25.4 |
U.S. state and local | 3.9 |  |  | 7.1 |  |  | 4.0 |
Non-U.S. | 1.5 |  |  | 0.6 |  |  | 0.5 |
| 17.0 |  |  | 33.4 |  |  | 29.9 |
Deferred: |  |  |  |  |
U.S. federal | 2.5 |  |  | (42.6 | ) |  | (4.3 | )
U.S. state and local | (0.4 | ) |  | (1.0 | ) |  | (0.2 | )
Non-U.S. | (0.8 | ) |  | 0.3 |  |  | (1.2 | )
| 1.3 |  |  | (43.3 | ) |  | (5.7 | )
Income tax (benefit) expense | $ | 18.3 |  |  | $ | (9.9 | ) |  | $ | 24.2 |
The reconciliation between income tax expense at the U.S. federal statutory income tax rate and reported income tax expense from continuing operations is presented below.
| 2019 |  | 2018 |  | 2017
| (in millions)
Expense at U.S. federal statutory income tax rates of 21%, 24.5% and 35%, respectively | $ | 17.2 |  |  | $ | 23.4 |  |  | $ | 27.5 |
Adjustments to reconcile to income tax expense: |  |  |  |  |
State income taxes, net of federal benefit | 3.2 |  |  | 4.8 |  |  | 2.7 |
Domestic production activities deduction | — |  |  | (2.4 | ) |  | (4.5 | )
Tax credits | (1.8 | ) |  | (1.7 | ) |  | (1.4 | )
Nondeductible expenses, other than compensation | 1.3 |  |  | 0.5 |  |  | 0.6 |
Valuation allowances | 1.3 |  |  | 0.5 |  |  | 0.4 |
Foreign income taxes | 0.1 |  |  | — |  |  | 0.3 |
Nondeductible compensation | 0.3 |  |  | 0.2 |  |  | 0.5 |
Excess tax benefits related to stock compensation | (0.3 | ) |  | (0.6 | ) |  | (2.1 | )
Federal tax rate change | — |  |  | (42.5 | ) |  | (0.4 | )
Federal transition tax | (0.6 | ) |  | 7.5 |  |  | — |
Uncertain tax positions | (1.4 | ) |  | — |  |  | — |
Basis difference in foreign investment | (1.1 | ) |  | — |  |  | — |
Other | 0.1 |  |  | 0.4 |  |  | 0.6 |
Income tax (benefit) expense | $ | 18.3 |  |  | $ | (9.9 | ) |  | $ | 24.2 |
Deferred income tax balances are presented below.
| September 30,
| 2019 |  | 2018
| (in millions)
Deferred income tax assets: |  |  |
Inventory reserves | $ | 11.7 |  |  | $ | 10.4 |
Accrued expenses | 10.0 |  |  | 13.3 |
Pension | 1.7 |  |  | — |
Stock-based compensation | 2.7 |  |  | 3.3 |
State net operating losses | 2.8 |  |  | 3.2 |
Federal credit carryovers | 2.8 |  |  | 2.1 |
Other | 2.4 |  |  | 1.0 |
| 34.1 |  |  | 33.3 |
Valuation allowance | (2.8 | ) |  | (1.9 | )
Total deferred income tax assets, net of valuation allowance | 31.3 |  |  | 31.4 |
Deferred income tax liabilities: |  |  |
Intangible assets | 95.6 |  |  | 95.7 |
Pension | — |  |  | 2.3 |
Basis difference in foreign investment | 4.7 |  |  | — |
Other | 18.9 |  |  | 11.4 |
Total deferred income tax liabilities | 119.2 |  |  | 109.4 |
Net deferred income tax liabilities | $ | 87.9 |  |  | $ | 78.0 |
Balance sheet presentation: |  |  |
Deferred income taxes | $ | 88.0 |  |  | $ | 79.2 |
Less deferred tax assets included in other noncurrent assets | 0.1 |  |  | 1.2 |
Net deferred income tax liabilities | $ | 87.9 |  |  | $ | 78.0 |
We reevaluate the need for a valuation allowance against our deferred tax assets each quarter, considering results to date, projections of taxable income, tax planning strategies and reversing taxable temporary differences. Our state net operating loss carryforwards, which expire between years 2024 and 2032, remain available to offset future taxable earnings. The following table summarizes information concerning our gross unrecognized tax benefits.
| 2019 |  | 2018
| (in millions)
Balance at beginning of year | $ | 3.3 |  |  | $ | 3.0 |
Increases related to prior year positions | 2.0 |  |  | 0.1 |
Increases related to current year positions | 0.4 |  |  | 0.3 |
Decreases due to lapse in statute of limitations | (2.4 | ) |  | (0.1 | )
Balance at end of year | $ | 3.3 |  |  | $ | 3.3 |
Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate. We recognize interest related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and administrative expenses. At September 30, 2019 and 2018, we had $0.3 million and $0.8 million, respectively, of accrued interest expense related to unrecognized tax benefits. The federal income tax returns for Mueller Co. and Anvil are closed for years prior to 2005 and for Mueller Water Products, Inc. for 2007 and 2008. Our 2009 through 2014 returns are closed except to the extent net operating losses from those years have been utilized on subsequent years’ returns. We also remain liable for any taxes related to U.S. Pipe sales for periods prior to 2012 pursuant to the terms of the sale agreement with the purchaser of the segment. Certain tax years remain open for our predecessor company, U.S. Pipe, which was a subsidiary of Walter Energy in those years. See Note 17. Our state income tax returns are generally closed for years prior to 2015, except to the extent of our state net operating loss carryforwards. Our Canadian income tax returns are generally closed for years prior to 2012. We do not have any material unpaid assessments.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration